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This is a discussion on Mr Spread Better's blog within the Trading Journals forums, part of the Reception category; www.paddypowertrader.com A trip down memory lane saw shares plunge on a tsunami of bad news across the banking sector. Darlingís ...

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Old Jan 14, 2009, 4:53pm   #33
 
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Equities Crash On Banking Woes

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A trip down memory lane saw shares plunge on a tsunami of bad news across the banking sector. Darlingís attempt to breathe life into corporate UK was eclipsed by news of further losses, job cuts and possible capital raising by European banks.

Stop loss management, or rather mismanagement, has played a major part in my trading fortunes over the past 24-hours. Yesterday I had a £4 short bet on FTSE, which Iíd opened at 4421. Keen to lock in a profit, I trailed my stop down to 4355 where I was duly hit. That trade made an overall profit of just over £250, but a wider stop loss might have kept me in the game for a much bigger prize today. Letís see, FTSEís currently trading at 4200, so that would have been (4421-4200)X 4=Aaagghhhhh.

Click the image to open in full size.

This morning I sold £5 of EURGBP at £0.9091. I bought back £3 at £0.9078 and brought my stop down to breakeven where I was taken out. Profit on the trade was £39-the EURGBP rate is now having a sniff at £0.90. Hmmm

I bought GBPUSD in a fiver after appalling US retail sales data. I paid $1.4539 and the price is now $1.4590. Looks good, except that somewhere in the middle of all that I was stopped out for a £95 loss.

Further short bets on FTSE and EURGBP mean that Iím a few quid up on the day but not a lot. Iím not too upset; it was deliberate plan to run tight trades the day before the ECB announcement and avoid getting mauled, and Iíve managed that. Itís just a great example of how a less cautious approach would have paid dividends (and there arenít many of those around these days).

Ah, and talking of the ECB, hereís another competition with a chance to win a copy of Harrimanís Money Miscellany. Three simple questions; the one nearest the bull wins:
1) How much will the ECB cut rates by?
2) Will the EURUSD be up or down on the day?
3) Will the Dax be up or down on the day?

For this competition weíre defining Ďthe dayí as between 7 am and 4 pm tomorrow; prices as per paddypowertrader.

So come on; thereís not much work involved here, just three simple guesses. Iíll get the ball rolling with a stab at a 75bp cut sending the EURUSD rate lower and the Dax higher. In the event of a tie weíll pull names out of Zís hat.

Finally, if youíre new to spread betting you might want to check out a piece Iíve just put out on a Dummies Guide To Charting Part I.

Happy Trading
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Old Jan 19, 2009, 12:35pm   #34
 
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Equities Rally As Bush Bids Goodbye

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Yesterday the Dow popped down for a close look at 8000 and decided not to bother. The screens are full of reasons for todayís savage bounce but, more importantly, will these levels hold?

Not a great dayís trading today; luckily a late-in-the-day forex trade bailed out some poor trading in FTSE. I made money this morning by closing out a short bet on FTSE from last night, then made the mistake of trying it again after blisteringly bad numbers from Citigroup and Merrills. But in a week of bad news, traders just couldnít be bothered by these numbers; after all, the banks only need to pull the arm on the taxpayersí fruit machine and money will come pouring out.

Needless to say the loss wiped out the overnight profit as I stopped out near the high of the day (doesnít that just always seem to happen?).

Undeterred I went £2 short this afternoon at 4208 and Iíll probably run it over the weekend.

Iíd been prepared to leave Sterling alone today. I missed the early move and didnít fancy chasing it near $1.50. But as the price retreated back to the $1.49 area I reckoned there could be a trade on. I keep a record of the daily trading range for GBPUSD; itís generally over 200-pips, but todayís action fell well short of that. The key was betting on the right direction-a bounce off $1.49, or a decent fall through it.

Click the image to open in full size.

The first visit to $1.49 saw a worthy bounce, but this was short-lived and next time around I decided to have a go at it. Normally Iíd wait for a confirmed break of the big figure before committing myself, but the price action was giving a strong hint at breaking through.

I sold a fiver at $1.4902, with a 40-pip stop. The plan worked and I closed out £3 at $1.4878 and $1.4862 (Friday afternoon is no time for heroics). I bought back £1 at $1.4803 and still have £1 running, protected by a stop at $1.4852. Nice one Charlie!

And hereís one for next week;
Click the image to open in full size.

The chart looks tempting. I donít like holding forex positions over the weekend, so I should leave this for Monday. The Euroís had a good bounce from the same low as last Friday, but I still think it has to go easier, regardless of interest rate policy. Discipline, discipline; Iíll shut my screens down early to avoid the temptation.

Hey! Hereís a good tip. Tonight, grab the remote off the missus and switch onto Sky Sports. Sale need to beat Munster at Thomond Park to stay in the Heineken Cup. Munster will start with a 5-point advantage from their supporters, but Sale are on top form and have a point to prove. It should be a cracker.
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Old Jan 19, 2009, 6:08pm   #35
 
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Will Bailout Save The Banks?

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European banks got caned this morning; Her Royal Highnessís Bank of Scotland plunged over 50%, closely followed by the newly formed Lloyds-HMG-HBOS, down 35%.

My morning began with a nasty reminder of the downside of using stops overnight. In Fridayís blog (Equities Rally As Bush Bids Goodbye) I decided to run my £2 FTSE short bet over the weekend. I left my trade in good shape; I was reasonably in the money with a stop loss at 4198 locking in a small profit.

Well, not exactly. First off, I tend to leave the desk a bit earlier on Fridays to start the weekend, so I missed the mega sell-off that started just after the close. Secondly, the subsequent rally didnít go quite far enough to stop me out, but this morningís optimistic open did. The early mark-up took me out at 4208, way above my stop, back to where I sold in the first place.

Todayís trades havenít been too adventurous, what with the US being on holiday. In the early market I sold GBPUSD for a £50 profit and made a further £20 by shorting EURGBP. And talking of EURGBP, although I missed out on Fridayís equity collapse by leaving early, at least it prevented me from opening a short in EURGBP, as mentioned in the blog. Now that would have ruined my Monday morning.

Click the image to open in full size.

At the moment Iím running three short bets, opened this morning:

1) Iím short £1 FTSE (again) from 4195.
2) Iím £2 short of EURUSD from $1.3196. I sold £5, but closed out £3 at $1.3186 to make sure of a gain. This oneís working quite nicely, but Iím giving the bet some slack with my stop way back at $1.3186.
3) Not done this for a while (and really should have done it last week when I first thought about it) but I sold £7 of Lloyds TSB HBOS (whatever) at 76.3p. Iíve since bought a scrap back at 64p, leaving me short of a fiver. Iím not sure about this one; at 68p it could be a screaming buy, but the price action seems to be following the pattern of Northern Crock, Bungle & Bodgit and RBS.

Click the image to open in full size.

The Eurozone still looks to be falling apart at the seams. Today, Spain lost its treasured AAA credit rating, following last weekís downgrading of Greece. And over the weekend an ex-official from the Irish central bank called for the Emerald Isle to threaten withdrawal from the EU unless itís owners, France and Germany, bother to lend a helping hand. Like I mentioned in last weekís blog (Around The Forex World In 12 Days) whichever way you shake the tin, it doesnít look good for the Euro.

This week sees CPI and GDP releases in the UK and a big step-up in US corporate earnings reports. Check out whatís coming up in the Weekly Wrap.

And finally, we have one last copy of Harrimanís Money Miscellany to give away. As this week is likely to be about one man this competition has an Obamarama theme. All youíve got to do is guess the level of the Dow when President Obama finishes his inauguration speech tomorrow. As usual, the prices will be as per paddypowertraderís screen and nearest the bull will win. Iíll get the ball rolling with a wayward 7950.

Happy Trading

PS. If youíre going through a tough time with your trading, watch BBC2 at 9.00 to see how bad it can get with Million Dollar Traders.
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Old Jan 20, 2009, 3:11pm   #36
 
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Sterling Hits 7-Year Low Against The Dollar

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Once again UK officials managed to put the skids under Sterling. The Pound smashed the 7-year low against the Dollar and hit an all-time low against the Yen.

Iíve said before that, even if they deny it, it suits the UKís men in charge to have a lower currency. The usual depreciation downside, higher inflation, isnít the number one worry, but a lower exchange rate to help whatís left of its export sector would do nicely thank you.

And what better way to give a green light to the forex market than to combine a multi-billion giveaway with a request for the banks to say just how much mess theyíre really in? So on the day that RBS hinted that it had lost more than any UK company in history, the Prime Minister admits that he hasnít a clue just how bad things are!!! Interesting to note that 93% of the open positions on the paddypowertraders Home page are long GBPUSD. After a 600-pip drop from 5 0′clock yesterday, that could be a canny move.

On the trading front Iím still short of FTSE and Lloyds, but yesterdayís short bet on EURUSD was stopped out at $1.3156 (boy does that look a long way off now!).

This morning I added a £2 short bet on HSBC at 508.4. The price had been holding up well, relative to the other banks, and this morning provided a golden opportunity to short the opening rally. Doing the school walk meant that I missed the best prices, but Iím happy enough with the position.

Click the image to open in full size.

But the real earner was another short bet in GBPUSD. I thought Iíd missed the boat as the rate was already 200-pips lower by 7 oíclock, but once the break below $1.42 was confirmed I sold £5 at $1.4181. As usual I closed out part of the trade for an early profit, buying £3 at $1.4156, but resisted the urge to deal again until the break below $1.40. I reckoned that area might put up some resistance so bought back £1 at $1.3996 and trailed my stop down to $1.4021 where I was hit later on. But thatís OK; the trade put £400 plus in my back pocket, leaving me with just my short equity bets to manage this afternoon.

Click the image to open in full size.

Hey! Check out the Lloyds price. Does some-one know something there? Itís just gone 38p bid. HSBC is holding up well at 496p-perhaps benefiting from switch activity. Iíve just closed out some of my Lloyds short at 40p and sold some more HSBC at 490p. And Iíve just closed out my FTSE short at 4115 in case there is an Obama rally this afternoon. There shouldnít be as thatís far too predictable, but you can never tell with the Americans. If we get a decent rally Iíll be looking to put my short back on again.

Donít forget this afternoonís Obamarama competition; if you havenít entered yet, weíre looking for where you reckon the Dow will be when Obama finishes his inauguration speech. Nearest the bull wins our last copy of Harrimanís Money Miscellany.

Enjoy the speech, and happy trading
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Old Jan 23, 2009, 3:27pm   #37
 
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New Lows For Britain

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Growth in the UK, or rather the lack of it, was even weaker than expected. Traders ignored a dubious rise in retail sales and sold Sterling down to yet another new low. Equities are pushing ever closer to Novemberís lows.

A lighter day on the trading front so far; I had to see a man about a car so missed the early Dollar strength. When I got back I didnít fancy selling Sterling at a multi-year low, and buying it would have been spitting into a very strong wind. The US session usually offers between 80 and 160 pips on a quiet day so Iím sitting back with my charts and watching to see which way the US folks go.

Yesterday, late trading saw EURGBP crash through my tidy uptrend line (featured in Equities Fail To Hold Gains), but by this morning normal service had resumed with a new recent high at £0.9472.

I closed out my FTSE short late yesterday purely because I didnít fancy much exposure to the vagaries of overnight markets. It was the wrong move, but thatís OK; Iíd locked in a profit and my short bets in Lloyds and HSBC are showing small gains this morning. My exposure isnít much, but I still need to decide whether to close them out ahead of the usual weekend banking headline lottery.

Hey, check out this chart and see if you get as irritated as I did:

Click the image to open in full size.

I trade FTSE regularly, but Iím a simple bloke and recently most of my attention has been on the forex market (my missus will tell anyone that I canít multi-task). Iíve been trading FTSE on the short side, but not with the determination, or size, that I used so successfully in the autumn.

But this chart makes it look so simple; when the index rises up to the downtrend line, sell it. Go and have a shot of caffeine then come back and book your profits! So, whatís the chart telling me now?

Two things:

1) I should look to sell any rally up to the 4050 area (although thereís room for a rally up to 4100 on todayís candle). Of course itís only a chart, and charts do go wrong so I wouldnít blindly sell there, but I would watch the test of the trend line and sell on a failure to hold above it.

2) So far FTSE has found support at the 3950-4000 area. A lot of the clever people are targeting a break of 3953 for full speed ahead to Novemberís lows. Oh, and something else worth watching out for is the weekly close on the S&P 500. In Wednesdayís blog (Sterling Rout Continues)I highlighted the break below key support at 812. The pre-open price is 811 so it should make for some interesting trading.

With GEís results out the way thereís no data out from the US today.

Happy Trading
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Old Jan 26, 2009, 4:41pm   #38
 
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Bumper Day For Banks And Sterling

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Sterling defied a barrage of negative press stories to rally against both the Dollar and Euro. A relief rally in banks pushed my FTSE short deep into the red.

Whenever a chart looks Ďirritatingly simpleí beware-or you might get caught out like I did. And I made matters worse, not only by trading, but by trading badly. Instead of just selling the rally at Friday afternoonís high I waited for my mechanical trigger and by the time the green light flashed the FTSE index had fallen to 4030. I sold £3 at 4033; a trade which is now covered in red ink.

In fairness, I could have taken a small profit in pre-trade this morning, but took the lower market as confirmation that the sell-off remained in place. As Julia Roberts once said, ďBig Mistake, Big Mistake.Ē Iím currently about £250 in the red on that trade and a touch more on whatís left of my bank short bets (luckily I took a nice turn on the HSBC bet on Friday).

This is a huge week for US earning reports (check out the Weekly Wrap for details) so Iím not looking to panic out of my trades on a Monday rally. However, the US missed a trick on Friday, allowing the S&P 500 to close above the key 812 level; despite dropping below the line during the day, support has continued to stand up and look strong:

Click the image to open in full size.

Surprise of the day must be good old Sterling. Another weekend of negative press (Darling plans another rescue, MPC member says rates should head for zero, biggest fall in house prices since 2001, yeah, yeah, yeah) saw a predictable sell-off in early trade. I can count my blessings that I didnít join in, but my discipline paid off. I didnít want to press the button until my MACD indicator confirmed the moving average crossover. No confirmation, no trade; not long afterwards Sterling bounced, taking out a couple of resistance levels to boot.

Click the image to open in full size.

I was happy to let the school walk/gym combination get in the way; my trend indicators still have Sterling heading south so I wasnít too keen to open a counter-trend bet so early in the week. But an hour and a half later, with GBPUSD just breaking $1.38, I decided to push the button. My indicators showed that I was late to the party, but had scope to come away with a result.

I paid $1.3803 for a £5 bet and took a £50 profit out of the trade, but the usual rush to bring my stop loss up for a profit meant that I missed out on the bigger gains. Thatís OK; for me itís too early to call a change of direction in Sterling, so Iím happy to nibble away at the smaller trades.

Update
Interesting that traders tried to take GBPUSD down at the US open (1-1.30pm) but the break below $1.38 aroused as much interest as a Gordon Brown press conference. It looks a tempting buy, but Iím going to be off the desk for a while so Iíll leave it and kick the cat later when I return to a higher level.

On a similar theme, equities look to have ignored the early negative earnings releases, FTSE lacking sellers below 4100. I canít bring myself to buy the market but can expect a bigger loss on my short when I return.

Happy Trading
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Old Jan 27, 2009, 7:06pm   #39
 
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IFO Numbers Fail To Spark The Euro

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The Euro found few friends despite better than expected IFO numbers and lost ground against the Dollar and Sterling.

I had to work hard this morning to pay for my toilet rolls and Weetabix; plenty of trades but no big winners. Iím still running my short FTSE bet, along with short bets in Lloyds and HSBC, and, yes, theyíre still covered in red ink. Last night I traded the Dow in both directions for a bit of beer money, but Iím trying to break my relationship with the evening session in favour of a bit of family time.

Todayís trades focussed on Sterling, mainly because it showed slightly more sign of life than the equity markets. But itís been damned tricky because the short charts are showing a positive trend, but scaling back to the daily chart still has it in a miserable downtrend. Also, one of the factors driving Sterling higher is the supposed return of risk appetite. As I donít reckon the risk appetite is sustainable I shouldnít get too bulled up on Sterling. Looking at todayís chart I donít think Iím alone in wondering what to do next.

The dayís range has struggled up to around 215 pips, but check out the chart:

Click the image to open in full size.

Thereíve been a few trades in both directions, but by the time part of the move has been used to confirm the direction (ie breaking the moving average), and part of the move has been taken up by a retracement to the trailing stop loss, it wasnít a day for ísit back and watchí trades.

My winning trades came from going long of GBPUSD early on, then changing direction with the chart and shorting the Pound. I sacrificed part of my winnings to the trading gods with an unsuccessful trade in EURGBP. I bought EURGBP at £0.9363 after support at £0.9350 appeared to hold. I placed a tight stop at £0.9340 in case support broke. Unfortunately it broke just long enough to close me out before pushing ahead as my trade had planned.

I made the ultimate sacrifice to the trading gods this morning; I traded in gold. Regular readers will be well aware of my trading record on gold (Iím King Midasís poor cousin). Gold looked to have held the $900 support with enough conviction yesterday so, with the Dollar going weak at the knees, I thought a small purchase of bling at $906 was reasonable.

It might have been reasonable, but it was poorly timed and has languished in the losersí corner all day with a stop loss at $890. Iím still in there, but not booking a holiday on the strength of that trade.

Update
OK, so after the mother of dull afternoons GBPUSD threw a neat dummy to send me short at $1.4034 then rallied hard. I took a bloody nose, closed the trade for £100 loss and went long to recoup nearly the full amount. Hmm, thatís trading.

Donít forget tonight on BBC2 itís the final instalment of Million Dollar Traders (even better at 10 oíclock thereís a new series of Shameless).

Happy Trading
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Old Jan 28, 2009, 6:13pm   #40
 
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Bad Bank Gives Shares A Boost

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How much further will equities travel before they arrive? The ĎBig Bad Bankí talk has worked wonders for ailing banks around the world, but how will equities react when the facts are announced?

The rallyís a bit perplexing (what with short bets on FTSE and a couple of banks), but there are several factors driving the move. The obvious one is the ĎBad Bankí talk and, in percentage terms, itís given one helluva kicker to the banking sector. Also, speculation over what could come out of tonightís FOMC meeting is adding to the purple haze.

Given that the Fed hasnít got any interest rates worth talking about, itís thought they might announce details of their Quantitative Easing plan. And if youíre wondering what the hell thatís all about, Moley wrote a great piece about it in December.

And to finish off the bull casserole add a sprinkle of month-end adjustments. But, especially in the US, the January month-end is more peso sauce than a touch of basil. The S&P provides added interest as US folk-lore has it that Januaryís performance determines life for the rest of the year; if Januaryís up, itís a bull year; if itís down, put on your bearskins.

At the moment the S&P is fast-tracking at 866; itís target to break-even is around 894 and I reckon there are plenty with a vested interest in seeing the market above there.

Click the image to open in full size.

But what of next week? With the month-end out of the way and Obama unwrapping the nationís present to itself, whatís there to look forward to? Yeah, it might be the start of the brave new world, but weíve seen that a few times before over the past year.

This morning George Soros lent an uncharacteristic helping hand to Sterling. Having presumably made another fortune selling Sterling he reckoned that the risk of shorting below $1.40 was too great. Cheers George.

Iíve made 4 bets on Sterling today; all long, and guess what? If Iíd run my first trade of the day with a wider stop then the others wouldnít have been necessary. But each trade was a winner, and I quite like the practise of spotting entry levels. My gains were a modest £200, but so long as the numbers are in black, not red, Iím happy. Sterling could have a testing few days; the GBPUSD rate is approaching resistance in the $1.44-1.4450 area.

Quite a few of the clever guys are marking this as the end of Sterlingís glorious run and a return to the serious business of disappearing down the toilet. But, if this level is broken and held then (Wahey) up we go to the 50-day mav at $1.4750.

No surprises, my gift to the trading gods ran to form. My gold trade was stopped out this morning for a £160 loss. If ever I trade in gold again, take notice. Trading against me is the safest bet youíll get!

Happy Trading
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